People often decide to file bankruptcy after they come to the realization that they can’t pay all their bills with the income they have. This may be because of an unexpected illness, just because things got a little out of hand or a variety of other reasons.
For those who are considering bankruptcy, one of the most stressful things to happen is getting phone calls, demand letters or other contact from creditors who are trying to collect money. Filing bankruptcy can put a stop to those attempts because of the automatic stay.
Purpose of the automatic stay
The automatic stay prohibits creditors from trying to collect on debts once the person files for bankruptcy. While this provides relief for the debtor, it also helps to keep the bankruptcy process fair by stopping creditors from trying to circumvent the creditor payment process in an effort to collect more money than they should receive.
It’s highly unlikely that creditors will all receive the full balance they have due when a person files for bankruptcy. By stopping creditors from trying to collect money outside of bankruptcy, the automatic stay ensures that all creditors will receive the portion of the money they’re due, which is based on a specific priority schedule for payments.
Anyone who files for bankruptcy has the ability to enjoy a fresh financial start. This comes with specific responsibilities, such as credit counseling and a debtor education course. Working with someone who can ensure the filer understands exactly what they need to do and what will happen through the bankruptcy process is beneficial.